Judge Knot: Politics and Development in International Investment Law

By Todd N. Tucker

‘Judge Knot’ explores the biggest and the most controversial success story in international law: investor-state dispute settlement, or ISDS. Since 1990, investors have launched hundreds of claims against government regulation. This exclusive inside look explains what makes the system tick: its poorly understood centuries-old origins, why corporations demand investment law solutions to political problems, how arbitrators supply these solutions, and why the system lasts despite the many politicians and citizens unhappy with it. Building off of an unprecedented set of interviews with the arbitrators who actually decide the cases, ‘Judge Knot’ brings together the best of political science, law and development economics scholarship and offers a concrete alternative to ISDS that leverages what works about the system and discards what does not, so that international law can be more supportive of democracy and development goals.

• Language: English
• Publisher: Anthem Press
• Release date: Mar 30, 2018
• ISBN: 9781783087938

Book preview

Judge Knot

Anthem Frontiers of Global Political Economy

The Anthem Frontiers of Global Political Economy series seeks to trigger and attract new thinking in global political economy, with particular reference to the prospects of emerging markets and developing countries. Written by renowned scholars from different parts of the world, books in this series provide historical, analytical and empirical perspectives on national economic strategies and processes, the implications of global and regional economic integration, the changing nature of the development project, and the diverse global-to-local forces that drive change. Scholars featured in the series extend earlier economic insights to provide fresh interpretations that allow new understandings of contemporary economic processes.

Series Editors

Kevin Gallagher—Boston University, USA

Jayati Ghosh—Jawaharlal Nehru University, India

Editorial Board

Stephanie Blankenburg—School of Oriental and African Studies (SOAS), UK

Ha-Joon Chang—University of Cambridge, UK

Wan-Wen Chu—RCHSS, Academia Sinica, Taiwan

Alica Puyana Mutis—Facultad Latinoamericana de Ciencias Sociales (FLASCO–México), Mexico

Léonce Ndikumana—University of Massachusetts–Amherst, USA

Matías Vernengo—Bucknell University, USA

Robert Wade—London School of Economics and Political Science (LSE), UK

Yu Yongding—Chinese Academy of Social Sciences (CASS), China

Judge Knot

Politics and Development in International Investment Law

Todd N. Tucker

Anthem Press

An imprint of Wimbledon Publishing Company

www.anthempress.com

This edition first published in UK and USA 2018

by ANTHEM PRESS

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© Todd N. Tucker 2018

The author asserts the moral right to be identified as the author of this work.

All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book.

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library.

ISBN-13: 978-1-78308-790-7 (Hbk)

ISBN-10: 1-78308-790-0 (Hbk)

ISBN-13: 978-1-78308-791-4 (Pbk)

ISBN-10: 1-78308-791-9 (Pbk)

This title is also available as an e-book.

To Gail and Dale, who taught me when to judge and when to laugh it off.

CONTENTS

List of Illustrations

Acknowledgments

Introduction

Index

ILLUSTRATIONS

Figures

2.1Investment treaty signings, 1959–2016

2.2Investment treaty arbitrations launched, 1987–2016

2.3Investment law’s development: A historical institutionalist account

3.1Investment awards finalized, 1990–2016

3.2Do states win or lose investment arbitrations (and how)?

3.3How much do investors demand and get in investment arbitrations?

3.4How well do investors and their lawyers make out in investment arbitration?

3.5What state vice or virtue does investment law address?

3.6How should/do states go about changing?

3.7Do states actually need investment treaties?

4.1How do arbitrator types interact with one another?

5.1What is an arbitrator’s role?

5.2Division of labor and power complicates investment regime reform

5.3How investors can game the investment regime complex

6.1Rise of the American lawyers, 1880–2016

6.2Unionization’s jump after courts tamed, 1930–1954

6.3Roadmap toward a better investment law: An institutionalist proposal

Tables

2.1Norm evolution in sociological institutionalism

3.1Investment arbitration outcomes by region, 1990–2017

3.2Compatibility of arbitral ideology with development scholarship

4.1Tribunal types and hypothesized outcomes for states with state-tilting chair

4.2Tribunal types and hypothesized outcomes for states with investor-tilting chair

5.1Investment law: Beyond control?

5.2Outcomes for states in annulment cases before the International Centre for Settlement of Investment Disputes

A.1Interviewees, by country and appointments

ACKNOWLEDGMENTS

This book is about the obscure world of investment law. It is also about a journey: my own.

When I started writing this, I was coming off 12 years as a global justice advocate. Protests against the World Bank? Check. Marching against the Iraq War? Check. Loads of intemperate remarks about capitalism and corporations? You bet.

Despite our hard-fought campaigns, my advocacy coalition ended up on the losing side of congressional votes on US trade agreements that we worried would undermine US well-being and sovereignty. A regional trade deal with six Central American countries (2005), followed by bilateral ones with Bahrain (2005), Oman (2006), Peru (2007), Colombia (2011), South Korea (2011) and Panama (2011)—each passed at the insistence of big business and presidents of both political parties, and over the howls of labor unions, environmentalists and consumer groups.

It was time for a reset. Back in 2002, I had completed a master’s degree in development studies at Cambridge University. At the time, word was just breaking about a string of new cases under an obscure legal system known cryptically as investor–state dispute settlement, or ISDS, whereby multinational corporations were suing sovereign governments such as Argentina over various regulatory policies. As a kid, I had lived in Argentina, so this piqued my interest. I briefly considered doing a PhD then, but there were hardly any cases to study. Fast forward to 2012, and the number of lawsuits had piled up in the hundreds. Corporations were catching on to this new remedy.

I wanted to get to the bottom of whether this novel investment law mattered, and if so, how. That endeavor became my PhD dissertation (2012–16), which led me to reexamine long-held assumptions from my advocacy days. This book is an elaboration of that work, updated to include new chapters putting the research in a broader comparative context and taking account of the post-2016 changes in politics.

I could not have done any of this without the ongoing support of my loving friends and family. I thank foremost my wife, best friend and volunteer editor, Heather Boushey. She uprooted herself from a very productive think-tank career to work remotely alongside me in England for my course work and has helped me through the stress and exhilarations of this project with patience and love. My parents, Gail and Dale, brother Daniel and sister-in- law Emily Bunker were relentless encouragers, as was Heather’s family.

I also thank the scores of arbitrators who took time to help me better understand their work. They fly to Washington, DC, and around the world to arbitrate, working from early in the morning until late at night. Despite such demanding hours, they took time from their grueling schedules to share perspectives with a graduate student not even in their field. Even if they do not agree with the conclusions I draw, I hope they find the outsider perspective informative as they contemplate the future of the system they helped build.

My supervisor Ha-Joon Chang was instrumental in shaping my research interests back when I was a master’s student in 2001, and then encouraged me to return to Cambridge over a decade later to write down my strange ideas that fell between the gaps of what traditional disciplinary departments could offer. I thank him, Walter Mattli and Michael Waibel, who served on my viva committee and provided invaluable feedback. Lesley Dingle at the Squire Law Library and Diana Kazemi of the Centre of Development Studies provided valuable help navigating Cambridge resources. The Gates Cambridge Trust generously supported me throughout my PhD research, while Sarah Pray and the Open Society Foundations provided the boost of financial and moral support needed to take the manuscript and associated reports over the finish line from my perch at the Roosevelt Institute. In recent years, Roosevelt fellows have published Rewriting the Rules of the American Economy and Hidden Rules of Race; I’m pleased to extend the institutionalist framework of those two books to the global economy.

My editor Ed Paisley read the entire manuscript several times and made it much better. Kevin Gallagher helped champion me at Anthem Press, where Abi Pandey, Tej Sood, Nisha Vetrivel and their teams doggedly ushered the manuscript through. Daniel Tucker and Kelsea Henson helped conceive the cover art. Pete Morelewicz swept in literally just hours before submission to help rescue me from my sorry attempts at amateur graphic design; his expert work on Figures 2.3, 4.1, 5.2, 5.3, and 6.3 will be (I believe) among the central contributions of the overall project. I also thank the two anonymous peer reviewers who gave detailed comments.

I benefited tremendously from feedback from participants at the Institute for New Economic Thinking’s Advanced Graduate Workshop in Bangalore in 2014; the seminars convened by Ha-Joon Chang and the Centre of Development Studies; Gates Cambridge Scholar symposia; the Cambridge Replication Workshop; the World Trade Institute’s 2013 conference on the Role of the State in Investor-State Arbitration; the International Organization / iCourts 2015–16 conferences on The Judicialization of International Relations; the 2016 PluriCourts Arbitrator Behavior Workshop; and the 2013–16 annual meetings of the American Political Science Association and International Studies Association.

I was lucky enough to get advice, brainstorms, comments, tweets and needed encouragement from many great scholars, thinkers and practitioners across numerous disciplines at various stages of the five-and-a-half-year writing process, including Nellie Abernathy, Paul Adler, Todd Allee, Karen Alter, Wolfgang Alschner, Daniel Behn, Sam Bell, Eric Harris Bernstein, Jonathan Bonnitcha, Gabriel Bottini, Greg Brown, Julia Calvert, Jeff Colgan, Nathan Converse, Cosette Creamer, Brendan Duke, David Edeli, Haley Edwards, Michelle Egan, Isabel Estevez, Shailaja Fennell, Andrea Flynn, Susan Franck, Kevin Gallagher, Bryant Garth, David Gaukrodger, Timi Gerson, Geoffrey Gertz, Anna Ghosh, Nils Petter Gleditsch, Andy Green, Andrew Gruen, Emilie Hafner-Burton, Jennifer Harris, Jostein Hauge, Martin Hearson, Sue Holmberg, Heather Hurlburt, Andrew Hwang, John Ishiyama, Nicole Janz, Lise Johnson, Nikhil Kalyanpur, Anna Katselas, Robert Keohane, Andrew Kerner, Mike Konzcal, Ming Leong Kuan, Shaheeza Lalani, Olof Larsson, Simon Lester, Carlos Lopez-Gomez, Barry C. Lynn, J. W. Mason, Juan Mayoral, Benjamin McKean, Tim Meyer, Domna Michailidou, Katy Milani, Andrew Mitchell, Sara Mitchell, Avanti Mukherjee, Cecilia Nahon, Suresh Naidu, Fernanda Nicola, Peter Nolan, Andy Oswiak, Lenore Palladino, Clint Peinhardt, Krzysztof Pelc, Luke Eric Peterson, Cam Phillips, Mona Pinchis, Rodrigo Polanco, Mark Pollack, Mihaela Popescu, Matt Porterfield, Lauge Poulsen, Sergio Puig, Mike Pyle, Tonya Lee Putnam, Jose Quiroga, K. Sabeel Rahman, Brishen Rogers, David Rosnick, Virginia Rutter, Lisa Sachs, John Schmitt, Mark Schmitt, Thomas Schultz, Brad Setser, Ganesh Sitaraman, Anne-Marie Slaughter, Benjamin Smith, Jeff Staton, Marshall Steinbaum, Taylor St John, Joseph Stiglitz, Bob Stumberg, Anton Strezhnev, Steve Teles, Kyla Tienhaara, Joel Trachtman, Elisabeth Tuerk, Gunes Unuvar, Gus Van Harten, Pierre Verdier, Erik Voeten, Tania Voon, Lori Wallach, Dorian Warren, Zoe Williams, Will Winecoff, Felicia Wong and others I am inadvertently leaving out. Thanks also to the staff of Filter Coffeehouse, Pleasant Pops, Tryst, Cove DC and Hot Numbers, where I wrote much of the early drafts.

Finally, I thank Oxford University Press and the editors at the Journal of International Dispute Settlement for generously granting permission to reprint material first published there, refashioned as chapter 4. Also, chapters 2 and 6 include material first published in reports for the Roosevelt Institute.

INTRODUCTION

Judge not, lest ye may be judged

For the judgment ye judge ye shall surely be judged, you gets no love

—KRS One

Since classical times, international law has focused on restraining states’ freedom of action on the global and regional stages, from setting rules on protection of diplomats to ensuring non-interference with commerce on the high seas.

In recent decades, however, international legal constraints have shifted far behind national borders. Multilateral lending institutions’ structural adjustment programs require sovereign nations to slash budgets, privatize public enterprises and cut pensions. Tax treaties limit how and when countries can collect revenue from multinational business enterprises operating in their borders. Trade agreements have shifted from simply locking in low tariffs to forbidding policies that today’s rich countries once deployed to climb up the economic developmental ladder themselves. And all of these constraints are backed up by developed countries’ bilateral foreign-aid programs.

One newly controversial instrument in this arsenal is the investor–state dispute-settlement (ISDS) system contained in thousands of trade and investment treaties. Its defining feature: allowing foreign investors to sue host states outside of national courts before transnational tribunals. These disputes are triggered by multinational companies that are unhappy with host-state regulations. The tribunals themselves are comprised of arbitrators hired by the litigating company and country on a case-by-case basis. Corporations have employed this dispute-settlement instrument to launch aggressive claims against states over environmental conservation, financial stabilization and public-service provisions.

Since a tribunal issued the first investment treaty award in 1990, more than 700 investor–state dispute-settlement lawsuits have been launched—most of them in just the past few years. And criticisms of the system are growing in number. The online news-site BuzzFeed ran a four-part investigative series by Pulitzer Prize–winning author Chris Hanby, titled Global Super Court: The Secret Threat That Makes Companies More Powerful than Countries (Hanby 2016a). Time magazine’s Washington correspondent Haley Edwards published a popular book for Columbia Global Reports, called Shadow Courts: The Tribunals That Rule Global Trade (Edwards 2016). New York Times now regularly runs articles on developments in ISDS practices, featuring titles such as Trans-Pacific Partnership Seen as Door for Foreign Suits Against U.S. (Weisman 2015).

Critics worry that ISDS tribunals represent a type of corporate-driven implosion of democracy. Former Secretary of State Hillary Clinton, during her 2016 presidential campaign, called for a fundamental reexamination of these dispute-settlement practices, saying, We need to have a new paradigm for trade agreements that doesn’t give special rights to corporations that workers and NGOs [non-governmental organizations] don’t get (Conahan 2016).President Donald Trump’s trade representative, Robert Lighthizer, told the US Senate that he is always troubled by the fact that nonelected non-Americans can make the final decision that the United States law is invalid in ISDS tribunals (Swanson 2017).Indeed, their inclusion in international trade treaties has generated outrage on the left and the right, in legislatures and in the streets—stalling conclusion of major new trade deals such as the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP) (Hanby 2016b).

But proponents of investor–state suits had a running start defending a system that has existed on treaty paper since the 1960s. First, they point out that governments win more than they lose—and that the United States has never lost a case. Second, they argue that investment treaties bring the rule of law to developing nations, which is good for them and for US multinationals. Third, they argue arbitration is faster and more flexible than domestic courts, which might be corrupt or favor the national government. Finally, proponents note this dispute-settlement system has been around for decades without major problems for governance or defections by governments. As investment law proponent President Barack Obama noted, they are not new. There are over 3,000 different ISDS agreements among countries across the globe. And this neutral arbitration system has existed since the 1950s. The United States has investment agreements with 54 different countries over the last 30 years (Sargent 2015). In other words, the system is deeply entrenched: recent trade deals did not create it and rejecting a given trade deal (as is being contemplated as of early 2018 in the context of North American Free Trade Agreement renegotiations) will not eliminate it.

Judge Knot argues that both sides of the debate miss what international investment law is really doing and why it matters.

The ISDS template was introduced, and thrives today, because it builds on three longer-standing projects of Western liberalism. Reforms of the system will have a difficult time gaining analytical traction if they do not somehow address these three pillars (either by finding alternative means of fulfilling their functions or by demonstrating their functions are not essential).

First, this template extends late twentieth-century ideas from law and social science that prescribe a minimal state role as the best recipe for economic growth. The formula involves independent courts and central banks, low inflation, balanced budgets, lowered trade tariffs accompanied by the privatization of state-owned enterprises and the lowering of barriers to foreign direct investment (Williamson 1990). Sometimes called neoliberalism, sometimes the Washington Consensus, this suite of policies was colorfully termed a golden straitjacket by columnist Thomas Friedman:

As your country puts on the Golden Straitjacket, two things tend to happen: your economy grows and your politics shrinks. That is, on the economic front the Golden Straitjacket usually fosters more growth and higher average incomes—through more trade, foreign investment, privatization and more efficient use of resources under the pressure of global competition. But on the political front, the Golden Straitjacket narrows the political and economic policy choices of those in power to relatively tight parameters. That is why it is increasingly difficult these days to find any real differences between ruling and opposition parties in those countries that have put on the Golden Straitjacket. Once your country puts it on, its political choices get reduced to Pepsi or Coke—to slight nuances of taste, slight nuances of policy, slight alterations in design to account for local traditions, some loosening here or there, but never any major deviation from the core golden rules" of deregulation. (T. L. Friedman 1999, 105–6)

Second, investment arbitration reflects a nineteenth- and twentieth-century notion that international lawyers can and should help states de-politicize economic disputes. In this view, law is an alternative to the evils of war, colonialism and gunboat diplomacy (Koskenniemi 2004; Hathaway and Shapiro 2017). In a world where war was an acceptable means of settling disputes and collecting debts, threatening war was been a necessary tool of statecraft. In a world where offensive war is illegal (as it is under the United Nations charter), alternative arrangements have to be made for defusing conflict.

Finally, this law of investment operationalizes an eighteenth-century Enlightenment insight that courts help check popular excesses. The United States stood alone for most of modern history in elevating judicial review of legislation to a semi-constitutional status. Touring the young country in the early 1800s, Alexis De Tocqueville noted that a more immense judicial power has never been constituted in any people […] [T]‌here is almost no political question in the United States that is not resolved sooner or later into a judicial question (quoted in Carrese 2010, xviii). By the late twentieth century, the arrangement had spread, with dozens of countries adopting US-style review. Indeed, the idea of democracy has become associated as much with the protection of minority rights as with majority rule—its original defining feature (Hirschl 2004).

Together, these three liberal projects elevate law above other means of resolving disputes, such as mediation, administration by bureaucrats, letting the market decide or fighting it out through politics or violence. Historically, however, today’s rich countries did not use golden straitjackets. The politicization of their economies was the rule, not the exception. And judicial review (as just noted) only recently diffused beyond the United States. But even as neoliberal economics was tarred by the 2007–08 global financial crisis, the project’s liberal underpinnings continue to be influential. There are not many calls for a shift of policy away from judicialization per se: rather, most calls are for moves between types of judicialization. For instance, the European Union has advocated for converting the system of ad hoc arbitration into a full-blown international investment court. More than 220 prominent economists and law professors wrote a letter to the US Congress asserting that investor–state dispute settlements should be replaced with domestic litigation (Sachs 2016). Critics of investment law may question neoliberal prescriptions to let the markets rip, but the system is resilient precisely because it plays into longstanding Western narratives about the rule of law.

Judge Knot takes a contrarian view. I argue in this book that investment arbitration is at its worst when closest to law and at its best when farthest away. National courts and legal scholars ask arbitrators to demonstrate neutrality and consistency as the conditions for judges deferring to arbitration awards. But neutrality is impossible and deference undesirable. Rather, the decisions of investment lawyers should ring out as one voice among many in the grand project of building a democratic political economy. Societies should not waste the most beneficial service these lawyers can offer—a capitalist-legal perspective on policymaking. But neither should this perspective be privileged above others, treating their decision making as final and relegating, to a second order, the resolution of disputes by politics, administrations and markets. A rightsized role allows international arbitrators to do what they do well, while complementary institutions check and balance them. Global popular constitutionalism is what I call this alternative, building off a complementary project in domestic law called popular constitutionalism (Kramer 2005). In my framework, structural change of economies and political engagement are not distractions from good governance—they are good governance. If this seems audacious, that is because it is. In an era where rising inequality is threatening the sustainability of democracy, a forward-looking agenda needs to be big and at scale.

To get to this alternative vision, I take the reader on an unprecedented look inside investor–state dispute-settlement tribunals. Because of the secrecy of these tribunals, current journalism and scholarship generally treat these bodies like black boxes. Over 3 years and 6 cities, I conducted 55 hours of interviews with arbitrators from 18 countries. I interviewed at least one arbitrator from almost every one of the nearly 350 finalized investment disputes from 1990 (the first case) to the middle of 2017. Over two additional years, I triangulated interview analysis with an original dataset containing over a hundred variables on the outcomes and characteristics of these disputes and performed close qualitative analysis of the legal decisions themselves.

While primarily aimed at a political science readership (both academic and general), Judge Knot is shamelessly interdisciplinary, drawing from law, development economics and sociology. As such, I will dedicate space to offering explainer-type introductions to concepts from each discipline—concepts familiar to specialists, but that may be confusing to outsiders. In particular, chapter 2 positions my approach within international relations theory, and chapter 3 does the same for economic development theory. Legal and sociological themes are scattered throughout. But this is not interdisciplinarity for its own sake. Rather, I aim to show the relevance of investment law for broader debates on the proper role of government and market in society writ large. The book also is definitively written from an American perspective, and many of the examples I explore and policy quandaries I pose come from the perspective of righting the distortions I see clouding the US ship of state.

At this point, a few words are in order about what this book is not. This is neither primarily a study of the rise of multinational corporations and their various strategies (arbitral and otherwise) for pressuring governments, nor an examination of the on-the-ground experiences of governments and social movements. These are vitally important questions and are explored in depth by political scientists and journalists such as Lauge Poulsen, Geoff Gertz, Julia Calvert, Haley Edwards and Chris Hanby. At the same time, this book is not an exhaustive survey of investment doctrine. Legal scholars such as Gus Van Harten, Anthea Roberts, Mona Pinchis, Michael Waibel, Jonathan Bonnitcha, M. Sornarajah, Christoph Schreuer, Gary Born and a cottage industry of others have produced comprehensive works that fit that particular bill. Instead, my primary focus is on the judicial actors themselves and the broader issues their work raises. I build on the work of political scientists such as Lee Epstein, Mark Pollack and Karen Alter, who have produced detailed studies of the personalities and ideologies of adjudicators of the US Supreme Court, the World Trade Organization and the European Court of Justice.While Yves Dezalay, Bryant Garth and others have produced valuable socio-legal studies of commercial arbitrators, Judge Knot is the first volume to use qualitative political science methods and concepts for a close study of investment-treaty arbitrators. This struck me as an important gap worth filling, given how active these arbitrators are and how they have at least as much discretion in shaping rules as do their tenured counterparts. Throughout, I question the desirability or even achievability of so-called global rule of law, echoing concerns raised in national security contexts by scholars such as Samuel Moyn and Ian Hurd.

Finally, a few notes on terminology.

Unless otherwise noted, I use ISDS, international investment law and investment-treaty law to refer to arbitration disputes launched by an investor against a state pursuant to a bilateral, plurilateral or multilateral treaty between states. This is distinct from private arbitration, disputes pursuant to investor–state contracts/concessions or litigation brought by an investor under national investment laws. These other variants of litigating can share many of the same features as treaty-based investor–state dispute settlement (and are even sometimes confusingly called ISDS), but they pose different policy challenges. Most importantly for present purposes, treaties are harder to get out of, often requiring difficult renegotiations—thus the title, Judge Knot. In contrast, states can change their own national investment laws or contracts with investors much more readily.

I use institutionalism in a variety of ways. Chapter 2 discusses rational-choice institutionalism, sociological institutionalism and historical institutionalism in international-relations literature, while chapter 3 turns to new institutional economics and institutionalist political economics derived from development studies. As can be seen from the nomenclature, there is consensus among many scholars that institutions matter, that society’s rules and norms affect political and economic life. The point is obvious to the lay reader, but only makes sense by reference to the underlying disciplinary debates, where realists emphasize the balance of military power, and neoclassical economists emphasize the primacy of free markets. As will be clear from those two chapters in particular, I identify more closely with historical institutionalism as a research methodology and with institutionalist political economy as a substantive theory of how states and markets interact. But the precise lines between all of the various institutionalisms are blurry, and all schools will benefit from cross-fertilization with one another.

Wherever possible, I avoid acronyms—the alphabet soup that clutters up much writing on global economic issues. I make exceptions for a few frequently used proper names such as the primary focus of this book—the investor–state dispute-settlement system—as well as for terms such as the North American Free Trade Agreement, the World Trade Organization, fair and equitable treatment and most-favored nation.

References

Carrese, Paul O. 2010. The Cloaking of Power: Montesquieu, Blackstone, and the Rise of Judicial Activism. Chicago: University of Chicago Press.

Conahan, Amy. 2016. "Clinton and Sanders Get Specific on Trade Before PA Primary." Pittsburgh: Pennsylvania Fair Trade Coalition.

Edwards, Haley Sweetland. 2016. Shadow Courts: The Tribunals That Rule Global Trade. New York: Columbia Global Reports.

Friedman, Thomas L. 1999. The Lexus and the Olive Tree. London: Anchor Books.

Hanby, Chris. 2016a. Secrets of a Global Super Court. BuzzFeed, August 28, 2016.

———. 2016b. Elizabeth Warren Squares Off Against Global Super Court. BuzzFeed, October 9, 2016.

Hathaway, Oona A., and Scott J. Shapiro. 2017. The Internationalists: How a Radical Plan to Outlaw War Remade the World. New York: Simon and Schuster.

Hirschl, Ran. 2004. Towards Juristocracy: The Origins and Consequences of the New Constitutionalism. Cambridge, MA: Harvard University Press.

Koskenniemi, Martti. 2004. The Gentle Civilizer of Nations: The Rise and Fall of International Law 1870–1960. Cambridge: Cambridge University Press.

Kramer, Larry D. 2005. The People Themselves: Popular Constitutionalism and Judicial Review. Oxford: Oxford University Press.

Sachs, Lisa. 2016. "220+ Law and Economics Professors Sign Letter Opposing ISDS in the TPP." New York: Columbia Center on Sustainable Investment.

Sargent, Greg. 2015. Is TPP Trade Deal a Massive Giveaway to Major Corporations? An Exchange between Obama and Sherrod Brown. The Washington Post, April 27, 2015.

Swanson, Ana. 2017. A Nafta Battleground on the Shores of Canada. New York Times, October 16, 2017, sec. Politics.

Weisman, Jonathan. 2015. Trans-Pacific Partnership Seen as Door for Foreign Suits Against U.S. New York Times, March 25, 2015.

Williamson, John. 1990. What Washington Means by Policy Reform. In Latin American Adjustment: How Much Has Happened, 90–120. Washington, DC: Peterson Institute for International Economics.

Chapter One

ENTERING THE JUDGE KNOT

A company was able to sue a country over a public health measure through an international court. How the fuck is that possible? […] You’ve got to give it to them. That’s impressive. Someone should really give those lawyers a pat on the back. And, a punch in the face. But […] a pat on the back first. Pat, then punch. Pat, punch. They need a pat, punch. Little pat, big punch. That’s what they need.

—Comedian John Oliver (2015)

All Tangled Up

Did you hear the one about the billionaire, the nun and the lawyers? It is not a joke, but a story that reveals the enormous complexities of our international system for governing cross-border investment. The tale will take us from Manhattan to Missouri, from the Cayman Islands to Peru and back to the United States, showing us how any local investment dispute has the potential to go global.

Meet Ira Rennert. Once banned from the US securities brokerage business for taking excessive risks with his clients’ money, the American financier went on to become one of the country’s foremost buyers of distressed businesses. From smelters in Missouri to coal-pulverizing plants in Kentucky to magnesium pits in Utah, Rennert had an eye for finding floundering businesses and buying them up at bargain-basement prices. He financed the deals through junk bonds—loans in the newly acquired company’s name (Thornton 2003). This brought cash in the door quickly but saddled the companies he acquired with heavy debt burdens for years to come. Rennert would gradually strip down and sell these companies’ useable assets. Sooner or later, these businesses’ stock prices would plummet or they would go into bankruptcy, and Rennert would jump ship and move onto the next deal (Elstein 2011; Shinkle and Lambrecht 2002).

His business acumen made him fabulously wealthy. According to Forbes Magazine (2017), he is worth more than $4 billion, making him one of the richest men in the world. His house in the Hamptons on Long Island is the largest private residence in the United States, valued